The USD/JPY is so close to breaking out February highs investors can taste it.  The long-fought battle may come to a conclusion today.  The USD/JPY is finally building up some nice momentum, albeit slow.  The significance of these levels is displayed by the heavy consolidation taking place over the last 4 or 5 weeks. 

The currency pair is strengthening from our 2rd tier downtrend line with confidence.  However, before we get ahead of ourselves, we need to keep in mind the USD/JPY has given several head fakes in its return to 100.  Investors are still hesitating sending the USD/JPY much higher because it would likely imply large near-term gains.  The U.S. is clearly in the lead when comparing the two economies.  The U.S. is reporting stabilization and improvement in some of its data points while economic data being emitted from Japan continues to disappoint even reduced expectations.  Since both countries have set their interest rates close to zero, the Carry Trade is unwound. 

Additionally, both Japan and America are participating in quantitative easing.  Therefore, America’s economy outperforming Japan’s creates a convincing argument for a weaker Yen.  A stronger Dollar is music to the ears of Japanese manufacturers and exports being crushed by such a strong Yen.  We placed two new downtrend lines on our chart to give investors an idea of where future confrontations lie.  Fundamentally, we find resistances of 99.79, 100.28, 100.71, 101.44, and 101.98.  To the downside, we see supports of 99.06, 98.16, 97.66, 97.14, and 96.66.  The USD/JPY is currently exchanging at 99.48.

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